Why Malcolm Turnbull wants to charge Google and Facebook GST on Australian ad revenue

Multinational tech giants Google and Facebook could soon be charged goods and services tax on advertising booked by Australian companies if a proposal flagged by federal Communications Minister Malcolm Turnbull is adopted.

While multinational corporations continue to come under fire for minimising their tax bills in Australia, Turnbull has floated the idea of using GST as a way to claw back some of this forgone tax revenue.

“The Australian media industry is under enormous pressure from online platforms – notably Google and Facebook,” Turnbull said in a statement issued to SmartCompany.

“The modest amounts of company tax both companies pay in Australia has been a matter of great concern, here as well as in other countries, and there is a global discussion going on about how these internet age companies should be taxed in a manner that delivers a fair return to the countries where they make most of their money.”

Turnbull said Australia has “a real problem … in the erosion of our tax bases” but said “changes to international tax treaties take time and are contentious”.

“Another approach which has been canvassed is to impose the GST on advertising booked on these platforms by Australian residents,” Turnbull said.

“At the moment, little or no GST is collected in respect of advertising by Australians on international online platforms like Google and Facebook. This can be done unilaterally and would recover very substantial amounts of revenue.”

According to The Australian, local companies are expected to spend more than $2.4 billion on online advertising with the likes of Google and Facebook, with a 10% GST charge therefore raising $240 million for the state governments.

“All of these questions are being considered in the tax review that the government is undertaking,” Turnbull said.

“We need to have a frank and informed discussion about how to ensure Australia is not short-changed in the internet age and the review will ensure that discussion is very well informed.”

Kate Carnell, chief executive of the Australian Chamber of Commerce and Industry, told SmartCompany the proposal is “worth having a close look at”.

“[Turnbull] is absolutely right that the international process of addressing base erosion and profit shifting we’re involved in with the OECD and others is a really important process, but getting the G20 plus the broader OECD together to agrees on issues is really hard,” Carnell says.

“It’s got to happen but finding other ways to address the issue here in Australia is essential.”

Carnell says the Australian economy quite clearly has a “problem with revenue” and it makes sense to consider proposals that can address this.

“What’s exciting about it is it’s important to have new ideas,” Carnell says.

“There’s got to be a debate about new and fair ways to generate revenue and make sure companies and the community more broadly pay a fair amount of money.”